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DoorDash cuts 1,250 jobs to control ballooning costs

Nov 30 (Reuters) – DoorDash Inc ( DASH.N ) said on Wednesday it was cutting about 1,250 jobs, or 6% of its total workforce, as the grocery supplier looks to keep a lid on costs to cope with a drop in demand. DoorDash went on a hiring spree to accommodate a flood of orders from people stuck at home during the height of the pandemic, but a sudden drop in demand from inflation-wary customers has left the company struggling with ballooning costs.

“We weren’t as strict as we should have been in managing our team growth … That’s down to me. As a result, operating expenses grew rapidly,” CEO Tony Xu said in a memo to employees posted on the company’s website .

“Given how quickly we’re hiring, our operating expenses — if they remain unabated — will continue to outgrow our revenue.”

The company’s shares, which have fallen approx. 64% this year, was up approx. 5% in morning trade.

DoorDash, which has delivery partnerships with Walgreens Boots Alliance ( WBA.O ) and Shake Shack ( SHAK.N ), has about 20,000 employees.

A Doordash delivery person rides a bicycle in the rain during the coronavirus disease (COVID-19) pandemic in the Manhattan borough of New York City, New York, U.S., November 13, 2020. REUTERS/Carlo Allegri/File Photo

“Greater emphasis on the cost structure is a welcome sign, especially given the potential for consumer spending to deteriorate faster than expected,” said Angelo Zino, analyst at CFRA Research.

Earlier this month, DoorDash reported a larger-than-expected quarterly net loss of $295 million, raising questions about the growth prospects of delivery firms as economies reopen.

British food delivery company Deliveroo ( ROO.L ) said in late October that sales growth would be at the lower end of its previous forecast.

DoorDash joins a list of multinational U.S. firms, including Inc ( AMZN.O ), Meta Platforms Inc ( META.O ) and Twitter Inc, that have laid off thousands of workers in recent weeks as they prepare for a potential economic downturn. read more

While DoorDash’s Xu reiterated that the business has been more resilient compared to other e-commerce companies, he said reducing operating expenses outside of headcount “wouldn’t close the gap.”

Reporting by Granth Vanaik in Bengaluru; Editing by Devika Syamnath and Anil D’Silva

Our standards: Thomson Reuters Trust Principles.

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